Vincent Howard and our Upland foreclosure defense attorneys frequently counsel clients considering bankruptcy as a way to stave off a foreclosure or related action, at least temporarily. All bankruptcies come with an automatic stay on debt collection, which means they automatically stop attempts to enforce debts, at least for the short term. However, creditors may be able to persuade the court to lift the stay under certain circumstances, particularly if they have a strong claim of legal rights. In Bushnell v. Bank of the West, Bank of the West received relief from the automatic stay in Kent Bushnell's bankruptcy, permitting it to retake possession of property it had purchased in a foreclosure sale. The Bankruptcy Appellate Panel of the Eighth U.S. Circuit Court of Appeals upheld that decision, finding the bank was a party in interest.
The opinion does not detail how the property fell into foreclosure or Bushnell's pre-bankruptcy claims. Bank of the West was a second lienholder on the property when it purchased the property at a February 2011 foreclosure sale. In August of that year, a Nebraska state court issued a writ locking Bushnell out of the property, though he was evicted in September and later reentered the property. In November of 2011, he filed for bankruptcy, prompting the bank to seek relief from the automatic stay in order to evict him. Bushnell filed a response to that motion arguing that he had the right to recover the property through an adversary proceeding. In that separate proceeding, he argued that the foreclosure was fraudulent and thus, he had taken adverse possession of the property. Details of the alleged fraud were not provided. The bankruptcy court accepted the bank's affidavit on the matter as true, and found cause to lift the stay. Bushnell's adversary proceeding was dismissed with prejudice.
On appeal, Bushnell argued that the bank was not a party in interest under bankruptcy law, because it has not established that it's a creditor or has any interest in the property. The BAP rejected that argument. The bankruptcy code defines a "creditor" to include a party with a right to an equitable remedy for a breach in performance, the panel said, and Bushnell's failure to vacate the property is such a breach. The bank had a writ and an order from state court, it observed. Indeed, it said the bank was a party in interest even if it had no creditor status because its interest in the property was adversely affected by the automatic stay. In addition, the panel said, Bushnell was wrong to reargue the foreclosure and foreclosure sale in his adversary proceeding, since those matters were unchallenged and are now finished, and the adversary proceeding was dismissed with prejudice. The panel went on to find Bushnell's other arguments unconvincing, finding, among other things, no abuse of discretion from the bankruptcy court's acceptance of the bank's affidavit as true.
Led by partner Vincent Howard, our Westminster foreclosure defense lawyers frequently counsel clients in positions similar to this -- people who want to invalidate a foreclosure through the bankruptcy courts. We've certainly seen cases where the bankruptcy filer's allegations were taken more seriously, although any case involving an allegation of wrongful foreclosure is fact-specific. In this case, it's not clear whether Bushnell's claims had merit, but it's also not clear whether the bankruptcy court seriously considered those claims in the first place, thanks to his filing after the foreclosure sale was finished. At Howard Law, P.C., our Rialto foreclosure defense attorneys recommend that homeowners fighting foreclosure act as early as possible, so they can get the scrutiny of a judge on their case before a foreclosure sale can create a purchaser with new rights.
If you're considering bankruptcy as a way to fight foreclosure and you'd lke the advice of an experienced attorney like Vincent Howard, don't wait to call Howard Law, P.C. You can reach us through our website or call 1-800-872-5925.